S&P 500 Climbs to Record as Macy’s Jumps Amid Fed Bets

By Aubrey Pringle -
Nov 13, 2013

U.S. stocks rose, sending benchmark
indexes to records, as Macy’s Inc. led a rally among retailers
and investors speculated the Federal Reserve’sJanet Yellen will
continue the central bank’s stimulus policy as chairman.

The S&P 500 gained 0.8 percent to 1,782 at 4 p.m. in New
York, surpassing a previous high set on Oct. 29. The Dow Jones
Industrial Average rose 70.96 points, or 0.5 percent, to a
record 15,821.63. About 6 billion shares changed hands on U.S.
exchanges today, in line with the three-month average.

“Macy’s and retail in general has pulled up the overall
market,” Tim Ghriskey, who helps manage more than $1.5 billion
as chief investment officer of Solaris Asset Management LLC,
said by phone. “Expectations were very low for the holiday
season, and perhaps now they’ve been raised a bit. The backdrop
around stocks remains favorable, and the market is anticipating
economic improvement, which will drive revenue and earnings.”

Investors have been weighing better-than-projected earnings
and data to gauge whether the economy may be strong enough to
withstand less stimulus from the central bank. This week will
bring reports on U.S. jobless-benefit claims and manufacturing
in the New York area.

‘Far Short’

Yellen, nominated to be the next chairman of the Fed, said
the economy and labor market are performing “far short of their
potential” and must improve before the central bank can begin
reducing monetary stimulus.

“A strong recovery will ultimately enable the Fed to
reduce its monetary accommodation and reliance on unconventional
policy tools such as asset purchases,” Yellen, the Fed’s
current vice chairman, said in testimony prepared for her
nomination hearing tomorrow before the Senate Banking Committee.
“I believe that supporting the recovery today is the surest
path to returning to a more normal approach to monetary
policy.”

The remarks show Yellen is committed to the central bank’s
strategy of attempting to boost the economy and lower 7.3
percent unemployment, more than four years after the economy
began to recover from the longest and deepest recession since
the Great Depression.

Scaling Back

Central bank policy makers will probably scale back the
monthly pace of bond buying at their March 18-19 meeting,
according to the median of 32 estimates in a Bloomberg survey of
economists on Nov. 8. Reducing bond purchases “ought to be on
the table at upcoming meetings” by the Federal Open Market
Committee, including Dec. 17-18, Fed Bank of Atlanta President
Dennis Lockhart said yesterday.

In the U.K., Bank of England Governor Mark Carney signaled
that officials may consider raising interest rates sooner than
they previously forecast as the U.K. economy recovers
“robustly” and inflation slows. The jobless rate as measured
by International Labour Organisation standards declined to 7.6
percent in the third quarter, the lowest since 2009, the Office
for National Statistics said today.

Record Highs

The S&P 500 has climbed to record levels this year as the
Fed maintained its $85 billion in monthly asset purchases.
Central bank support has helped propel the index higher by more
than 160 percent from its March 2009 low. The gauge has rallied
25 percent so far in 2013, poised for its best year in a decade,
and is trading at 16 times projected earnings, more than the
five-year average of 14 times profit, according to data compiled
by Bloomberg.

Pessimism about U.S. stocks among newsletter writers is at
the lowest level in at least 24 years. The percentage of
newsletter writers classified as bears by Investors Intelligence
dropped to 15.5 percent from 15.6 percent last week, the least
since Bloomberg began tracking the data in February 1989.
Optimistic, or bullish, newsletter writers dropped to 52.6
percent from a seven-month high of 55.2 percent last week.

Macy’s, NetApp Inc. and Cisco Systems Inc. reported results
today. Of the 455 S&P 500 companies that have announced so far,
75 percent have beaten analysts’ income forecasts, data compiled
by Bloomberg showed. Profits for the gauge will rise 4.7 percent
in the third quarter and 6.2 percent in the final three months
of the year, estimates compiled by Bloomberg show.

Nine of 10 main S&P 500 groups advanced. Consumer
discretionary stocks gained 1.6 percent for the best performance
among the industries.

Macy’s jumped 9.4 percent to a record $50.68. The second-largest U.S. department-store company reported third-quarter
earnings that beat analysts’ estimates as better local
selections boosted sales, signaling stronger demand headed into
the holidays.

“People are starting to think about the implications of a
positive holiday season,” Walter Todd, chief investment officer
at Greenwood Capital Associates LLC, said in phone interview.
“Retail for a while had been underperforming, but just the past
couple weeks we’ve gotten some positive data points from Gap,
Limited Brands and now from Macy’s.”

Microsoft, Tesla

Tesla added 0.7 percent to $138.70. The stock tumbled 29
percent from Sept. 30 through yesterday amid several reports of
battery-related fires in Model S cars, and as the Palo Alto,
California-based company posted third-quarter results that
disappointed some investors.

“We’re about five times less likely to have a fire than an
average gasoline car,” Elon Musk, chief executive officer of
the company and its biggest shareholder, said yesterday at a
conference in New York. Reaction to the fires reported by some
media was “extremely inaccurate and unreasonable,” Musk said.

General Motors Co. jumped 4.9 percent to $38.44 after the
Detroit-based carmaker that counts China as its biggest market
said it will open a new headquarters in Singapore to oversee
markets including Southeast Asia and India.

Colored Clogs

Crocs Inc. surged 9.8 percent to $13.89, for its biggest
gain since July 2012. The shoemaker known for its brightly
colored clogs is considering its strategic options after talks
to take the company private stalled, people with knowledge of
the matter said.

The company held talks with private-equity firms including
Blackstone Group LP and KKR & Co., two people said, asking not
to be identified because the information is private. The chance
of a deal is slim because of a gap in price expectations, said
one of the people.

Office Depot Inc., which completed a merger with OfficeMax
Inc. last week, rose 3.3 percent to $5.38. The company named
Roland Smith as chief executive officer and chairman of the
newly formed office-supply chain.

Cisco Systems dropped 7 percent to $22.32 as of 5:01 p.m.
After the close of regular trading, the company reported
quarterly sales that fell short of analysts’ estimates amid a
slowdown in government spending and increased competition for
sales of low-cost networking equipment. Cisco’s board also
authorized $15 billion in additional stock buybacks.